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16 Cards in this Set
- Front
- Back
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Security |
Securityis a transaction in which the buyer invests money in a common enterprise andexpects to earn a profit from someone else’s efforts Commonexamples: stock, note, bond |
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33 ACT |
Regulates the issuance ofsecurities§GovernsInitial PublicOffering(IPO) or Secondary Offering Exemptsecurities: Tendto be more secure investments (in banks, government, insurance policies) Exempttransactions Privateofferings Crowdfunding |
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Public Offering |
Public Offering Requires: Underwriting Bestefforts or firm commitment Registrationwith the SEC FileRegistration Statement and Prospectus withSEC and distribute Saleseffort -Roadshows -Can’tunduly hype stock§Goingeffective- the IPO |
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33 Act Liability |
Fraud: seller of security is liable for any misstatement or omission in connection with sale of a security Fraud in the registration statement/prospectus: Purchaser can recover from everyone who signed the registration statement -Includes the Auditors! -Purchaser does NOT have to prove reliance |
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34 Act |
•Regulatestheissuer of securities•Requires:•Annual10-K•Quarterly10-Q•Form8-K to report significant developments |
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Liability under 34 Act |
Section 18 prohibits fraud in ‘34Act filings Falseor misleading statement in filings Relianceon the statement Theprice was affected by the false filing |
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Liability under 34 Act (part 2) |
§Section 10b- prohibits fraud in connection with purchase and sale of any security – any statements in public Plaintiff must show: -Misstatement or omission of material fact -Scienter, which means that the defendant acted with knowledge or willfully §Purchase or Sale -Reliance -Can assume, but rebuttable; Fraud on the Market -Economic Loss – plaintiffs suffered a loss in the value of their investment -Loss causation – economic loss must be caused by the misstatement/omission |
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Fraud under the 34' Act (Matrixx) : Material |
MatrixxInitiatives v. Siracusano Matrixxissued statements about Zicam being posed for growth, but warnedof potential material adverse effect that could result from product liabilityclaim Did not disclose it had alreadybeen sued Zicam = 70% of revenue§Material = would alter “total mix”of information available |
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Fraud under the '34 Act: Scienter |
Inre HP Secs. Litig. Shareholders allege Whitman and HPviolated Section 10(b) of the 34 Act HP purchased Autonomy Corp. Laterlearned that Autonomy’s financials were inaccurate HP and Whitman made severalstatements about Autonomy that were positive HP wrote down the investment by$8.8b |
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Insider Trading |
The buyingor selling of company stock or securities for a profit based upon informationthat is not readily available to the public Violation of civil law and criminallaw |
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Insider Trading: The Law |
Strangers: can trade on nonpublic information liability Fiduciaries: Cannot trade on nonpublicinformation Unless preexisting arrangement totrade ---Constructive insiders included |
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Tippers and Tippees |
Generally Tippers are liable/guilty for passing along the nonpublic information (the “tip”) regardless of whether the tipper trades |
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Tippers and Tippees 2 |
Tippees areliable only if the tippee “knows of the personal benefitreceived by the insider in exchange for the disclosure” USv. Newman, but on review in the SupremeCourt next term |
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Misappropriation |
Corporate outsider” misappropriatesconfidential information for securities trading purposes in breach of a dutyowed to the source of the information” USv. O’Hagan (Lawyer working for law firm representing company gonna offer to Pillsbury company, buys Pillsbury stock before deal) |
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Section 16 Short Swing Trading- 34 Rule |
Insider must report their trades within two days Insiders must turn over corporation any profits if purchase and sale were within 6 months of each other. |
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